VIETNAM - LIFE INSURANCE – WHAT YOU MUST KNOW:
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This document discusses life insurance in Vietnam and the need for regulations on e-commerce for financial services distribution. It notes that while e-commerce has grown in Vietnam, there are currently no specific regulations enabling the distribution of insurance via e-commerce. The document recommends that the Vietnamese government issue a complete, detailed regulation on this to promote faster development of the insurance sector and allow insurers to reach more customers.
![VIETNAM - LIFE INSURANCE – WHAT YOU MUST KNOW:
OVERVIEW
Life Insurance Industry in Vietnam was established with 5 life insurers in the late 1990s and has extended
to 17 insurers as of mid-2015, with approximately 300 products and 300,000 agents. The market (new
business premium income) has been growing by more than 25% p.a. in recent years, in which the year on
year growth in mid- 2.016 was above 33.4% compared to the same period of last year.[1]
The insurance
market continuous to grow. The insurers have overcome difficulties and challenges, seized the
opportunity, continued to restructure and improve the competitiveness and management to complete the
objectives in 2016 with the results as follows. The total premium written in the first 10 months of 2016 is
estimated to gain VND 69,123 billion (increased by 22% against 2015) in which life insurance reached
VND 38,839 billion (increased by 30.62% against 2015)[2]
This shows the high and efficient growth off
the insurance industry and the active response to all basic insurance demand of the Vietnamese society.
In the context of this fast growing market and the increasing demand for support from life insurers so far,
the life insurance regulator (the Insurance Supervisory Authority under the Ministry of finance) has done
a great job in creating favorable conditions and providing the necessary resources to support the industry
to grow and thus, for the life insurers to better perform. Yet, there remain challenges to the market that the
concerned stakeholders should jointly address with the Ministry of Finance to ensure that the market
continues to grow at its full potential.
ISSUANCE OF COMPLETE REGULATIONS ON E-COMMERCE FOR FINANCIAL
SERVICES DISTRIBUTION
Relevant Ministries: Government, Ministry of Finance (MOF), Ministry of Industry and Trade (MOIT)
Issue description
The Government recently issued its Decree 73/2016/ND--CP (Decree 73)[3]
, effective since F July 2016,
providing guidelines for implementation of Law on Insurance Business. This appears to be an important
and major move of the Government reforming its governance over insurance business following last
attempts nearly 11 years ago. The new regulations is on one hand a consolidated version of former twin
Decrees 45/2007/ND-CP[4]
and 46/2007/ND-CP[5]
(both issued in 2007) enabling a more horizontal
approach, and at the same time introduce new requirements, amongst other, on important areas, namely
corporate governance, legal capital, investment regime, re-insurance and distribution.
Decree 73 improves and streamlines legal framework and addresses practical issues for the development
of the market. With this issuance, it is noted that one of the most challenging technical hurdle arising from
Decision 35/2015/QD-TTg[6]
of the Prime Minister (highlighted in last issue) in connection with product
approval has been duly addressed. The Ministry of Finance shall now appear as the one-gate-to-all
regulator who shall approve products and coordinate with Ministry of Industry and Trade on registration
of the same. This evidences a great effort of regulators toward development of regulatory framework and
execution thereof.
It's noted further that for the first time electronic transaction is regarded as a distribution channel for
purposes of soliciting insurance coverage. Though e-commerce has been established in Vietnam since
2005 and further guided in 2013, there are no specific regulations enabling distribution of insurance via e-
commerce vehicles. However, in practice, due to the society demand, foreign insurance companies have](https://image.slidesharecdn.com/vietnam-lifeinsurancewhatyoumustknow-170308023717/85/VIETNAM-LIFE-INSURANCE-WHAT-YOU-MUST-KNOW-1-320.jpg)
![developed both traditional method and tested its E-commerce with main products to facilitate the fast and
convenient distribution.[7]
Potential gains/concerns for Vietnam
According to the Decision 193/QD-TTg of the Prime Minister dated 15!0 February 2012 on Vietnam's
insurance market development strategy in the 2011-2020 period, the application of technology shall be
one of the basic measure to expand the insurance business. It is expected that the new solution of
application of electronic technologies can promote faster development of the sector with the aim to reach
the target percentage of online sales of 3 – 4% of GDP, by 2020. Furthermore, according to Ministry of
Industry and Trade, the revenue gained from e-Commerce of Vietnam has reached USD 5 billion in
2016[8]
which is 5% total revenue of domestic retail distribution of goods and services. In 202.0, the e-
Commerce turnover of Business to Consumers (B2C) transactions are forecasted to increase 20%
annually, reaching 10 billion and accounting 5% of total domestic distribution[9]
. Applying e-Commerce
is now the social trend in society's daily life and it includes also life insurance. This new move shall be a
major milestone moving forward for insurance business to reach a wider audience faster in Vietnam,
especially the young and dynamic generation. However, until now, there is no complete specific
regulation providing on the e-distribution of the insurance services, including life insurance.
Recommendations
We would like to recommend that the Government coordinates with the Ministry of Finance (as mainly in
charge and Ministry of Industry and Trade, etc. to facilitate issuing a complete detailed regulation on this
new channel, recognizing its advantages of wide coverage and convenience for transaction. We would
also like to note that in the limes of integration and upcoming FTAs, e.g. EVFTA to be implemented in
2018, the increase of the trade in goods and services will boost Vietnam's economy, therefore, Vietnam
needs a clear, complete structured financial regulations to prepare and fully gain the benefits from such
FTAs.
***
Please do not hesitate to contact Oliver Massmann under omassmann@duanemorris.com if you have any
questions or want to know more details on the above. Oliver Massmann is the General Director of Duane
Morris Vietnam LLC.
Thank you!](https://image.slidesharecdn.com/vietnam-lifeinsurancewhatyoumustknow-170308023717/85/VIETNAM-LIFE-INSURANCE-WHAT-YOU-MUST-KNOW-2-320.jpg)
VIETNAM - LIFE INSURANCE – WHAT YOU MUST KNOW:
- 1. VIETNAM - LIFE INSURANCE – WHAT YOU MUST KNOW: OVERVIEW Life Insurance Industry in Vietnam was established with 5 life insurers in the late 1990s and has extended to 17 insurers as of mid-2015, with approximately 300 products and 300,000 agents. The market (new business premium income) has been growing by more than 25% p.a. in recent years, in which the year on year growth in mid- 2.016 was above 33.4% compared to the same period of last year.[1] The insurance market continuous to grow. The insurers have overcome difficulties and challenges, seized the opportunity, continued to restructure and improve the competitiveness and management to complete the objectives in 2016 with the results as follows. The total premium written in the first 10 months of 2016 is estimated to gain VND 69,123 billion (increased by 22% against 2015) in which life insurance reached VND 38,839 billion (increased by 30.62% against 2015)[2] This shows the high and efficient growth off the insurance industry and the active response to all basic insurance demand of the Vietnamese society. In the context of this fast growing market and the increasing demand for support from life insurers so far, the life insurance regulator (the Insurance Supervisory Authority under the Ministry of finance) has done a great job in creating favorable conditions and providing the necessary resources to support the industry to grow and thus, for the life insurers to better perform. Yet, there remain challenges to the market that the concerned stakeholders should jointly address with the Ministry of Finance to ensure that the market continues to grow at its full potential. ISSUANCE OF COMPLETE REGULATIONS ON E-COMMERCE FOR FINANCIAL SERVICES DISTRIBUTION Relevant Ministries: Government, Ministry of Finance (MOF), Ministry of Industry and Trade (MOIT) Issue description The Government recently issued its Decree 73/2016/ND--CP (Decree 73)[3] , effective since F July 2016, providing guidelines for implementation of Law on Insurance Business. This appears to be an important and major move of the Government reforming its governance over insurance business following last attempts nearly 11 years ago. The new regulations is on one hand a consolidated version of former twin Decrees 45/2007/ND-CP[4] and 46/2007/ND-CP[5] (both issued in 2007) enabling a more horizontal approach, and at the same time introduce new requirements, amongst other, on important areas, namely corporate governance, legal capital, investment regime, re-insurance and distribution. Decree 73 improves and streamlines legal framework and addresses practical issues for the development of the market. With this issuance, it is noted that one of the most challenging technical hurdle arising from Decision 35/2015/QD-TTg[6] of the Prime Minister (highlighted in last issue) in connection with product approval has been duly addressed. The Ministry of Finance shall now appear as the one-gate-to-all regulator who shall approve products and coordinate with Ministry of Industry and Trade on registration of the same. This evidences a great effort of regulators toward development of regulatory framework and execution thereof. It's noted further that for the first time electronic transaction is regarded as a distribution channel for purposes of soliciting insurance coverage. Though e-commerce has been established in Vietnam since 2005 and further guided in 2013, there are no specific regulations enabling distribution of insurance via e- commerce vehicles. However, in practice, due to the society demand, foreign insurance companies have
- 2. developed both traditional method and tested its E-commerce with main products to facilitate the fast and convenient distribution.[7] Potential gains/concerns for Vietnam According to the Decision 193/QD-TTg of the Prime Minister dated 15!0 February 2012 on Vietnam's insurance market development strategy in the 2011-2020 period, the application of technology shall be one of the basic measure to expand the insurance business. It is expected that the new solution of application of electronic technologies can promote faster development of the sector with the aim to reach the target percentage of online sales of 3 – 4% of GDP, by 2020. Furthermore, according to Ministry of Industry and Trade, the revenue gained from e-Commerce of Vietnam has reached USD 5 billion in 2016[8] which is 5% total revenue of domestic retail distribution of goods and services. In 202.0, the e- Commerce turnover of Business to Consumers (B2C) transactions are forecasted to increase 20% annually, reaching 10 billion and accounting 5% of total domestic distribution[9] . Applying e-Commerce is now the social trend in society's daily life and it includes also life insurance. This new move shall be a major milestone moving forward for insurance business to reach a wider audience faster in Vietnam, especially the young and dynamic generation. However, until now, there is no complete specific regulation providing on the e-distribution of the insurance services, including life insurance. Recommendations We would like to recommend that the Government coordinates with the Ministry of Finance (as mainly in charge and Ministry of Industry and Trade, etc. to facilitate issuing a complete detailed regulation on this new channel, recognizing its advantages of wide coverage and convenience for transaction. We would also like to note that in the limes of integration and upcoming FTAs, e.g. EVFTA to be implemented in 2018, the increase of the trade in goods and services will boost Vietnam's economy, therefore, Vietnam needs a clear, complete structured financial regulations to prepare and fully gain the benefits from such FTAs. *** Please do not hesitate to contact Oliver Massmann under [email protected] if you have any questions or want to know more details on the above. Oliver Massmann is the General Director of Duane Morris Vietnam LLC. Thank you!